Buying your house versus renting in South Africa – the winner is clear
An analysis by Daily Investor revealed that it is a much better investment to buy the house you live in than to rent the house and invest the money.
Buying versus renting has long been debated in the South African property sector, with many considering a house an excellent investment.
There is a widely held belief that buying your primary residence is the best investment you can make and that it seldom declines in value.
Others believe that renting gives you more financial flexibility and that putting your money in the market is a better option than buying a house.
Daily Investor analysed the data to see which option gives people the best return on their financial investment.
For this comparison, we used two identical 2-bedroom apartments in the popular Midstream Estate in Centurion.
The average price for buying this 2-bedroom apartment is R3.04 million, while renting it will cost you R24,000 per month.
We assumed the buyer financed the property with a 100% loan at the current prime lending rate of 11.25% with a 20-year repayment period.
With this payment period and interest rate, the homeowner would have to pay a monthly instalment of R32,569.
BetterBond’s bond registration and transfer duty calculator estimated that it would cost R204,339 to register the bond and pay transfer duties.
Using data from the FNB House Price Index since 2001, the average residential property value increased by 8.13% annually.
The home buyer would also need to pay rates and taxes on the property, which are linked to its market value.
The current rates and taxes were calculated to be R2,054, based on calculations from the City of Joburg, and adjusted for the property’s market value over the 20-year period.
The homeowner would also need to maintain the property. A rough estimate is that it will cost 1% of the property’s market value and adjusted for inflation.
The starting maintenance was calculated to be R2,587 per month, and it would increase as the property value increased.
If someone decides to rent this property, it will cost them R24,000 monthly. This translates into an average rental yield of 9.3%.
For this comparison, the rent was kept at a constant yield adjusted to the property’s market value over 20 years.
Any money the renter saved was invested in the JSE All Share Index (ALSI). This includes the R204,339 bond registration costs.
The additional costs incurred by the buyer would be incrementally added to the renter’s ALSI investment and compounded at the ALSI’s average 20-year return.
At the start of the 20 years, the buyer would pay R13,210 more than the renter. However, as the rental expense increased, the gap narrowed.
After 7 years, the rental expense would be the same as the buyer’s monthly expenses. This means that there was no additional money left to invest.
From this point onward, all the renter’s expenses that exceeded that of the buyer were allocated toward the buyer’s wealth and also invested in the JSE ALSI.
At the end of the 20 years, the buyer would have a total wealth of R17.6 million, while the renter would have R5.6 million.
If the excess money were invested in the S&P500 instead of the ALSI, the buyer would have a total wealth of R19.5 million, and the renter would have R16.2 million.
Asset | Buyer | Renter |
JSE ALSI | R5.59 million | R5.65 million |
House | R12.01 million | No house |
Total Wealth | R17.61 million | R5.65 million |

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